In this post you will learn about Types of Demand on various basis. Understand the topic and make good notes of this topic: Types of demand
TYPES OF DEMAND
Demand for a commodity is the willingness of the buyer to buy the commodity at a specific price for a specified period of time. The various types of demand are as follows:
TYPES OF DEMAND ON BASIS OF VARIABLES
PRICE DEMAND
Price demand is one of the types of demand which refers to the different quantities of the commodity or service which consumers will purchase at a given time and at given prices, assuming other things remaining the same. The people are mostly concerned with the price demand in general. In case of Price demand; demand of the commodity has inverse relation with the price. As the price of commodity increases its demand falls and as the price decreases, its demand rises.
INCOME DEMAND
Income demand refers to the different quantities of a commodity or service which consumers will buy at different levels of income, assuming other things remaining constant. Usually the demand for a commodity increases as the income of a person increases unless the commodity happens to be an inferior product.
Example: Coarse grain is a cheap or inferior commodity. The demand for such commodities decreases as the income of a person increases. Thus, the demand for inferior or cheap goods is inversely related with the income.
CROSS DEMAND
When the demand for a commodity depends not on its price but on the price of other related commodities, it is called cross demand. It can be explained in case of two different kinds of goods:
Substitute goods: Tea and coffee are substitutes for one another. If the price of coffee rises, the consumer will be induced to buy more of tea and, hence, the demand of tea will increase. Thus in case of substitutes, when the price of one related commodity rises, the demand of the other related commodity increases and vice-versa.
Complimentary or joint demand goods: When the price of one commodity rises, the demand for it will fall and as a result of it the demand for the other joint commodity also falls (even though its price remains the same). For example, if the price of horses increases, their demand will fall and as a result of it the demand for carriages will also fall even though their price does not change.
TYPES OF DEMAND ON THE BASIS OF NUMBER OF CONSUMERS
INDIVIDUAL DEMAND
The individual demand refers to the demand for goods and services by the single consumer,
MARKET DEMAND
The market demand is the demand for a product by all the consumers who buy that product. Thus, the market demand is the aggregate of the individual demand.
MARKET SEGMENT DEMAND
The market demand can be sub-divided into the segments on the basis of geographical areas, price sensitivity, customer size, age, sex, etc. This is called as the market segment demand.
TYPES OF DEMAND ON THE BASIS OF DEPENDENCY
DIRECT DEMAND
Commodities or services which satisfy our wants directly are said to have direct demand.
Example: All consumer goods satisfy our wants directly, so they are said to have direct demand.
DERIVED DEMAND OR INDIRECT DEMAND
Commodities or services demanded for producing goods which satisfy our wants directly are said to have derived demand.
Example: Demand for a factor of production (say labor) is a derived demand because labor is demanded to help in the construction of houses which will directly satisfy consumers’ demand.
Thus, the demand for labor which helps us in making a house in a case of indirect or derived demand. The demand for labor is called derived demand because its demand is derived from the demand of a house.
JOINT DEMAND
In finished products as in case of bread, there is need for so many things—the services of the flour mill, oven, fuel, etc. The demand for them is called joint demand. Similarly for the construction of a house we require land, labor, capital, organization and materials like cement, bricks, lime, etc. The demand for them is, thus, called a ‘joint demand.’
COMPOSITE DEMAND
A commodity is said to have a composite demand when its use is made in more than one purpose. The products which have alternative uses have composite demand.
Example: The demand for coal is composite demand as coal has many uses—as fuel for a boiler of a factory, for domestic fuel, for oven for steam-making in railways engine, etc.
TYPES OF DEMAND ON THE BASIS OF TIME PERIOD
SHORT-TERM DEMAND
Short-term demand refers to the demand for products that are used for a shorter duration of time or for current period. This demand depends on the current tastes and preferences of consumers.
For example, demand for umbrellas, raincoats, sweaters, long boots is short term and seasonal in nature.
LONG TERM DEMAND
Long-term demand refers to the demand for products over a longer period of time.
Generally, durable goods have long-term demand. The long-term demand of a product depends on a number of factors, such as change in technology, type of competition, promotional activities, and availability of substitutes.
TYPES OF DEMAND ON BASIS OF USAGE OF GOODS
DEMAND FOR PERISHABLE GOODS
Perishable or non-durable goods refer to the goods that have a single use. For example, cement, coal, fuel, and eatables. Perishable goods satisfy the present demand of individuals. The demand for perishable goods depends on the current price of goods and customers’ income, tastes, and preferences and changes frequently.
DEMAND FOR DURABLE GOODS
Durable goods refer to goods that can be used repeatedly. For example, clothes, shoes, machines, and buildings. Durable goods satisfy both present as well as future demand of individuals. Therefore, consumers purchase durable items by considering its durability.
In addition, durable goods need replacement because of their continuous use. The demand for durable goods changes over a longer period of time.
TYPES OF DEMAND OF DEMAND ON THE BASIS OF MARKET
ORGANIZATION DEMAND
The demand for the products of an organization at given price over a point of time is known as organization demand. For example, the demand for Toyota cars is organization demand.
INDUSTRY DEMAND
The sum total of demand for products of all organizations in a particular industry is known as industry demand. For example, the demand for cars of various brands, such as Toyota, Maruti Suzuki, Tata, and Hyundai, in India constitutes the industry’ demand.
